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Spain Slips Back Into Recession in First Quarte

01 May 2012 08:59 (UTC +04:00)

Baku - APA-Economics. Spainâ€™s economy contracted in the first quarter, putting the euro regionâ€™s fourth-largest economy into its second recession since 2009, BusinessWeek reported.

Gross domestic product fell 0.3 percent, the same as in the previous three months, the Madrid-based National Statistics Institute said today. That compares with the Bank of Spainâ€™s estimate on April 23 for a 0.4 percent decline. From a year ago, GDP dropped 0.4 percent, INE said.

Spainâ€™s government is struggling to convince investors it can narrow the budget deficit by 3.2 percentage points of GDP this year as the economy shrinks and unemployment approaches 25 percent. While it forecast Spain to return to growth in 2013, Standard & Poorâ€™s last week lowered the nationâ€™s credit rating to three levels from junk status, citing concern the country will need to pour more money into its lenders.

â€œWe fear things are likely to get worse before they get better,â€ Martin van Vliet, a senior euro-region economist at ING Bank in Amsterdam said in a note. â€œThe recession will almost certainly deepen in the coming quarters, pushing unemployment to even more dramatic highs.â€

Spanish 10-year bond yields eased to 5.874 percent today from 5.881 percent on April 27, leaving the gap over equivalent German yields at 418 basis points. The yield is 1 percentage point higher than at the start of March as foreign investors reduced holdings of the nationâ€™s debt.